Earnings Release: Associated Banc-Corp Reports Steady Third Quarter Results Amid Economic Slowdown

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Earnings Release: Associated Banc-Corp Reports Steady Third Quarter Results Amid Economic Slowdown

Associated Banc-Corp (NYSE: ASB) announced a strong performance for the third quarter of 2024 despite the challenging U.S. economic environment. CEO Andy Harmening reported a diluted earnings per share (EPS) of $0.56 and a 2% increase in core customer deposits, reducing the need for wholesale funding. The company also noted a 1% increase in total loans, primarily in the commercial and automotive sectors, and a $6 million rise in net interest income (NII) to $253 million. With a robust capital position and ongoing growth initiatives, Associated Banc-Corp remains optimistic about its trajectory despite the cautious macroeconomic outlook.

Key Highlights:

  • For the third quarter of 2024, diluted EPS was $0.56.
  • Core customer deposits grew by 2%, reducing wholesale funding needs.
  • Since September 2023, 16 commercial relationship managers were added, with another 26 expected by early 2025.
  • Total loans saw a 1% increase driven by commercial and automotive sectors.
  • Net interest income rose to $253 million, with a net interest margin expanding to 2.78%.
  • Cumulative commercial loan growth of $750 million and deposit growth of $2.5 billion are projected by the end of 2025.
  • Strong capital position with a CET1 ratio of 9.72%.
  • Launched a new vertical business line for private deposits and payment solutions.

Company Outlook:

  • Projection of $750 million cumulative commercial loan growth and $2.5 billion deposit growth by the end of 2025.
  • Core customer deposit growth is expected to be at the lower end of the 3%-5% range for 2024.
  • NII growth for 2024 is anticipated to be between 0%-1%.
  • Full-year non-interest income growth is expected to be between -1% and 1%.
  • Expense growth expectation reduced to 1%-2% from a base of $783 million.

Challenges:

  • Cautious about macroeconomic factors affecting credit quality.
  • Commercial real estate portfolio is being closely monitored.
  • Non-interest income is expected to remain steady or grow slightly.

Positive Aspects:

  • Strong capital ratios with CET1 at 9.72%.
  • Improved customer satisfaction and a positive growth strategy for forward progress.
  • Optimism in wealth management sector performance and commercial relationships.

Concerns:

  • Despite strong performance, the company remains conservative in its growth projections amid economic uncertainty.

Q&A Highlights:

  • Focus on selected short-term loans in the commercial real estate sector.
  • Intentional slower growth in auto loans to maintain high credit quality.
  • Modest cash flow growth expected in the securities portfolio.
  • Positive operating leverage expected in 2025, dependent on interest rate reductions and overall revenue growth.

Associated Banc-Corp's third-quarter earnings announcement highlighted the company's resilience and strategic planning amidst a slowing economy. The focus on strengthening customer relationships, managing credit quality, and expanding its commercial team positions the bank for continuous growth. Maintaining a cautious yet optimistic outlook, Associated Banc-Corp is laying the groundwork for future success as it navigates economic challenges.

InvestingPro Insights: Associated Banc-Corp's solid third-quarter performance is further illuminated by key metrics from InvestingPro. The company's market capitalization of $3.42 billion reflects its substantial presence in the banking sector. With a P/E ratio of 19.5, ASB is trading at a reasonable valuation given its growth prospects and dividend history.

Speaking of dividends, InvestingPro Tips highlight that Associated Banc-Corp has impressively maintained consecutive dividend payments for 50 years, underscoring a strong commitment to shareholder returns. This aligns with the company's reported strong capital position and optimistic outlook. Additionally, the current dividend yield of 3.88% offers an attractive income opportunity for investors.

Profitability is underscored by an InvestingPro Tip showing that Associated Banc-Corp has been profitable over the last twelve months. This is consistent with the positive earnings report and the management's confidence in future growth.

InvestingPro provides seven additional tips for Associated Banc-Corp, offering a deeper analysis for investors seeking comprehensive insights.

While the company reported a 1% increase in total loans, InvestingPro data shows a 21.33% decline in revenue over the past twelve months. However, this should be viewed in the context of the challenging economic environment and the bank's strategic focus on high-quality growth.

InvestingPro's Fair Value estimate of $23.64 indicates potential upside from the previous closing price of $22.68, aligning with the favorable outlook and growth initiatives mentioned in the company’s earnings call.

These insights from InvestingPro complement the earnings report, providing investors with a more holistic view of Associated Banc-Corp's financial health and market position.